2023 (3) TMI 559 - AT - Income Tax

Exemption u/s 11 - amount recd. from students over academic fee being towards transportation /Mess etc. facilities as a separate business activity - HELD THAT - It is not in dispute that the Revenue has accepted the case in the earlier as well as subsequent years with identical facts wherein no additions were made in respect of the amount received from the students over academic fees towards transportations/mess etc. Further we observe that in the case of Daya Nanda Pushpa Devi Charitable Trust Vs. ACIT Ghaziabad 2021 (7) TMI 124 - ALLAHABAD HIGH COURT held that activity of running hostel is an integral part of education so as to out of clutches of Section 11(4A) of the Act though the assessee had maintain sufficient separate account in as much as separate ledger account for the same maintained. In view of the above settled position of law and considering the fact that the Revenue has accepted the case of the assessee on earlier as well as subsequent years with identical facts we are of the opinion that the grounds of appeal of the assessee deserves to be allowed accordingly the additions made by the A.O which was sustained by the CIT(A) is hereby deleted by allowing the Grounds of Appeal and consequently we hold that the assessee is entitled for the benefit u/s 11/12 of the Act. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The judgment involves the assessment of excess fees collected by the assessee, the treatment of such fees as separate business income, and the applicability of Section 11(4A) of the Income Tax Act.

Assessment of Excess Fees:
The assessee filed a return showing NIL income, but the assessing officer (A.O.) initiated scrutiny proceedings and determined that the excess fees collected over the authorized amount constituted business income under Section 164(2) of the Act. The A.O. taxed the unutilized amount after adjustments, leading to an addition of Rs. 67,31,240.

Appeal before CIT(A) and Tribunal:
The assessee appealed the assessment order before the Commissioner of Income Tax (Appeals) (CIT(A)), who partly allowed the appeal by upholding the addition. Subsequently, the assessee brought the matter before the Tribunal, challenging the CIT(A)'s decision.

Arguments and Legal Precedents:
The assessee contended that the Revenue had accepted similar cases in previous and subsequent years where no additions were made for similar activities. The assessee cited legal precedents and argued that the addition made by the Revenue was unwarranted and should be deleted. The Department, however, argued that the excess fees charged beyond government guidelines should be treated as separate business income.

Tribunal's Decision:
After considering the arguments and reviewing the case law, the Tribunal noted that the Revenue had accepted similar cases in the past. Citing a judgment of the Allahabad High Court, the Tribunal held that the activity of running a hostel was integral to education and not a separate business activity. Therefore, the Tribunal allowed the assessee's appeal, deleted the addition made by the A.O., and held that the assessee was entitled to the benefits under Section 11/12 of the Act.

Conclusion:
The Tribunal, based on legal principles and past precedents, ruled in favor of the assessee, overturning the addition made by the A.O. and CIT(A). The Tribunal's decision highlighted the importance of considering the nature of activities in relation to the objectives of the trust or institution when determining tax liabilities under the Income Tax Act.